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Divide and conquer

You’ve probably noticed a few distinct customer segments in your database. And you know that to market effectively to Bob, Carol, Ted and Alice, you need to communicate with each segment in a different way.

But if you want to truly approach one-to-one marketing, microsegmentation is your next step.

In a nutshell, microsegmentation is the creation of segments within a segment, with an objective of drilling down to find like behaviors.

Sounds like a good idea. But what if you want to delve deeper into your customer files for these segments in October? Is that too late to be effective for this holiday season? Not at all, according to Michael Greenberg, president of loyalty marketing firm Loyalty Lab.

“Many direct mail campaigns are constructed to allow late decisions on targeting and offer, and applying aggressive segmentation could be done as late as the end of November for certain campaigns,” Greenberg says. “E-mail is even less of an issue, since segmentation can be set just hours before delivery.”

Another advantage to microsegmentation this close to the holidays is it can help you prioritize your higher value/more-likely-to-convert customers over those who are less responsive, says Anna Lu, director of research and analytics at e-mail marketing firm e-Dialog.

“In essence, microsegmentation can help you hone relevant messages, and help you identify where you want to spend your marketing dollars,” Lu says.

“But let’s not forget, you must also allow enough time to plan for multiple marketing messages and strategies based on the microsegments,” she adds.

So how do you start? Lu says to audit the data you have, and incrementally use each data element to drive further segmentation. Once you have these microsegments, you need to think about how you are going to develop your marketing strategy, messaging, content and creative for each of these finite segments individually.

But “it’s only worth doing microsegmentation if you are able to treat each microsegment with a unique approach, or if you are able to use microsegments to prioritize your customer base,” Lu notes.

Greenberg adds that for someone who has only two segments, going to six is a big deal. Going from 20 to 50 is tougher, but someone who can effectively manage 20 probably has systems in place to handle 50. “I wouldn’t recommend going from two to 50 without a serious look at your systems,” he says. “Walk before you run.”

In most cases, it’s defining the segments that becomes more work. “And again, the task difficulty depends on your toolkit. It’s generally better to add only as many segments as you can manage well,” Greenberg says.

Targeting is key

Not surprisingly, general trends have proven that more relevant messaging based on profile, behavior and demographics typically performs better than broadcast marketing messages, says Lu.

In fact, Jupiter Research found that targeting tactics generate five times more revenue than broadcast campaigns. But, Lu notes, the actual lift percentage will vary by company, customer base, vertical market and marketing messages.

“There are many factors that affect ROI,” Lu says. “Our recommendation is to develop a test plan before moving forward on a broad base so that you are systematically measuring and testing performance. Also, continue to test and optimize to ensure that your marketing messages are resonating within your microsegments.”

And remember, microsegmentation is not a one-time deal. Greenberg says good companies will continue to find more ways to microsegment. Because the number of customers will typically stay small, you can experiment and see what works without breaking the bank.

“Generally we find that there are obvious ways to segment, and not so obvious ways to segment,” Greenberg says. “The obvious ones, once set up, should run with minor tweaks for a long time. The no-so-obvious ones will generally be shorter lived, and driven by temporary conditions like new store openings, new product introductions and new data collection practices.”

Maximizing e-mail campaigns

TO GET THE MOST VALUE FROM E-MAIL MARKETING PROGRAMS, you need to manage them with the same discipline applied to every other direct marketing channel. Larry Marmon, a partner with San Rafael, CA-based consultancy Lenser, offers five things you should be doing to make sure you’re maximizing your e-mail strategy.

Develop strategic and tactical e-mail plans. The planning process for e-mail campaigns should be as robust as the process you use for catalog or Web marketing efforts. Taking the time to build an annual e-mail marketing plan will yield enormous dividends.

Ensure appropriate measurement and reporting on the results from e-mail campaigns. There is no excuse for not measuring and reporting on key e-mail metrics. Tools exist to make this relatively easy for any size company. Key metrics to track include open, click-through and conversion rates, average order values, demand and opt-out rates.

Build a consolidated customer contact strategy. Few companies have developed fully integrated customer contact strategies. The best marketers today build targeted mail and e-mail contact strategies that enable them to maximize demand and profit from the fewest contacts.

Test everything. With e-mail marketing, you can test new concepts quickly and at a low cost. Make sure your e-mail plans for the year test the critical variables that drive the program: frequency of contact, creative and offers.

Maximize segmentation opportunities. E-mails easily allow for microsegmentation — something that is quite expensive in a print environment. As you build annual plans, consider the upside you can get from customized creative and making offers to unique customer segments.

If your program is large enough, you should also consider a recommendation engine to populate the products offered to different customers or customer segments. Using a recommendation engine to personalize product offerings is a good solution when you have a lot of distinct customer segments and a high SKU count. — TP